The company’s supporters will counter with “soon”, but that’s a song and dance we’ve heard before from or about the company. Back in 2000, the Motley Fool wrote,

“In 1999, Amazon spent $320 million on capital expenditures. This year, the number should drop to between $200 million and $250 million. Overall, the number should continue to slide from there.”

Nope. Spending didn’t even come close to sliding from there, short-term or long-term.

As was noted, few really cared then because the company was profitable, and it was fun to tell people you owned AMZN when attending a cocktail party. The downside of loose purse strings, however, has started to become evident for nearly a year now, with Amazon being forced to dip into the red ink for the first time in a long time.

Yes, Amazon had to spend to build a cloud storage division, which wasn’t on the radar in 2000. Same for the Kindle in 2003 and more warehouses in 2006. But that’s the point: It’s not the known that’s going to force Amazon to incur spending in the future — it’s the unknown.

And now competition is everywhere. What’s AMZN going to do to keep some distance between itself and its rivals in the future? And more than that, how much is it going to cost to do so?

As for what any of this has to do with Overstock, the contrast rather than the similarity is what makes OSTK the wiser bet.

While Overstock pales in comparison to Amazon in terms of technology and digital content, it’s gotten really, really good at selling physical goods. The pros think it’ll keep getting better at it too, with per-share earnings expected to grow from 98 cents this year to $1.22 next year. Sales are projected to grow by 8.2%.

To be fair, Amazon’s projections for next year are bullish too. Just bear in mind that the company has missed estimates in four of its past five quarters, even with those estimates getting progressively smaller. Overstock.com, on the other hand, has topped estimates in three of the past four quarters, and has grown earnings to meet and beat those targets.

Bottom Line

Amazingly, the market has remained in love with AMZN shares, bidding them up to record levels. The rhetoric has clearly changed over the last several months, though, as more of the media has started to pose the same queries explained above. It hasn’t affected the stock’s price yet, but the tolerance AMZN has enjoyed for more than a decade is finally starting to wear thin.

The deterioration of that undertow might be enough to finally make Amazon’s risk/reward ratio a little too heavy on the “risk” side of the equation.

On the flipside, Overstock remains a distant second to Amazon in most investors’ minds, though the company is slowly closing that gap. That’s because the pro-OSTK undertow is accelerating at Amazon’s expense as the market starts to see a certainty with Overstock that it doesn’t have with Amazon. The reason? Possibly because Amazon is trying to be so many things to so many people that it’s not doing any of them exceedingly well.

Time to rethink how to play the online-retailing space.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.